RelayRides, Out to Be the Community-Powered Zipcar, Hits the Ground With Pilot Rental Program

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In 2007 Shelby Clark’s car died just as he crossed into San Francisco, ready to start work with micro-lending nonprofit Kiva.org. He discovered ZipCar once he got to the Bay Area and a year later still hadn’t bought a car of his own.

Fast-forward to November 2008. Clark had moved to Boston to attend Harvard Business School, with the goal of getting into social entrepreneurship. He was biking through sleet and snow to his Zipcar rental, two-and-a-half miles away, while passing dozens of unused cars on the street. And there you have the inspiration behind his Cambridge, MA-based startup RelayRides.

“We already have this massive resource in our communities,” he says. “Zipcar works, but I thought it would be better if we could just use people’s cars.”

RelayRides builds on the car-sharing idea that Zipcar took the masses, but expands on its powerful themes of creating community and a more sustainable alternative to traditional car ownership. Clark thought the car-sharing model could better serve the customers if more vehicles were closer to where customers actually lived. And he thought the way to get them there is by using vehicles that are already owned by consumers and parked in residential areas.

RelayRides, which began its pilot phase with the first car rental last Wednesday, enables users to rent cars by the hour much like Zipcar. But instead of a commercial fleet, the RelayRides inventory consists of entirely of cars owned by everyday people. It strikes me as a more structured system of borrowing your best friend’s or roommate’s car (which I frequently do).

The company bought off-the-shelf technology to transform RelayRides vehicles for renting. It equips the customers with membership cards, and places card-readers in the cars, much like Zipcar. RelayRides also offers in-vehicle consoles that immediately gather user feedback on the condition of the vehicles, and allows users to extend their hourly reservations. Customers cansign up for the service online, and also rent wheels on a mobile version of the site.

Car-owners set their own rates for borrowers (with some guidance provided by RelayRides), but Clark says the rates typically fall 10 percent to 20 percent lower than the costs of Zipcar. The system has capped the maximum price range for rentals at $15 an hour, but Clark says the pricing system could provide an interesting play of supply and demand. Top travel times could hike prices on the RelayRides fleet. But these spikes could also push the community to rally and enlist more vehicles.

“We’ll see if what we learned in freshman year economics comes true,” he says.

The company has a handful of cars that are ready for renting, and several dozen that are in the enrollment process. Car owners take about a 65 percent cut of the cost of each rental of their car. RelayRides puts 20 percent toward the cost of insurance, and keeps 15 percent as its profit margin. Car owners in the system can earn between $2,500 and $7,500 per year, depending on the quality of their cars and the frequency they rent.

So what happens if you’re a car owner and you need your wheels for yourself? The RelayRides system allows you to indicate exactly when your car is out of the rotation for customers, and reflects when renters have paid to take your car out for a spin.

The company has attracted vehicle owners and renters with word-of-mouth and on-the-ground marketing initially, but Clark sees the fleet of RelayRides cars organically gaining momentum in the future. Car owners will encourage others to enlist their vehicles to attract more customers to the system, and a larger fleet of vehicles in more locations will further attract greater customer traffic, he says. He also notes that so far a well-maintained crop of cars has shown up, with a Porsche as the first vehicle enrolled. (Oh, and they almost got a white stretch limo, but the owner backed out.)

Clark has been working on RelayRides since November 2008, and has enlisted David Brook, founder of the first U.S. commercial car-sharing service in 1998, as the startup’s chief operating officer. The biggest speed bump to getting the service off the ground was finding an insurance policy that covered the cars, he says. “We basically had to invent a new insurance product,” Clark says. “Insurance companies aren’t the most innovative people out there—by definition, they are risk-averse.”

Clark wouldn’t reveal which insurance company ventured into this new market, but he said each car is covered with $1 million per-incident in theft, collision, and liability insurance while driven by RelayRides renters. That also includes providing car owners with rental cars while their ride is in the shop, or reimbursing them if their cars get completely totaled by a RelayRides customer.

This summer’s ongoing pilot phase in Cambridge is mainly intended to explore how the community responds to the user-powered car-sharing model, but there are improvements planned for down the road. For example, the company can only work with cars that have designated, off-street parking spots at present, but future advances could enable the system to use GPS technology to capture the location of vehicles parked on the street and text it to the next user. RelayRides, which works out of Polaris Venture Partners’ Dogpatch Labs, also plans to raise its next round of financing once the pilot concludes. (Clark didn’t say how much seed funding the startup has drummed up, just that it was enough to fund the pilot.)

Ultimately, Clark sees his service as a way to carry out his social entrepreneurship ambition that he first got a taste of at Kiva.org. “I like the concept of a relay—someone is passing something from one person to the next,” says Clark. He notes that relay races were his favorite events while on a swimming scholarship at Northwestern University. “People are working together for something. It’s for the community, by the community.”